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Tragedy of the Commons

The non-compete meme continues to pick up coverage. Today it’s on Slashdot

I’ve just started to read the follow up comments and reactions but this particular one caught my eye. Slashdot reader nickovs writes:

“It seems to me that non-competes are a classic example of what economists refer to as the Tragedy of the commons [wikipedia.org]. For any individual company it makes sense to get your staff to sign a non-compete, to stop them taking elsewhere the knowledge you’ve paid them to acquire. For a technology cluster as a whole (e.g. Silicon Valley or Route 128) the overall effect is negative due to stagnation in the workforce. The problem is that existing firms don’t have an immediate incentive to worry about stagnation in start-ups; they are more concerned about loosing good employees to their competitors.

The Tragedy of the Commons crops up all over the place – the most frequently seen cases are things like over-exploitation of natural resources. Generally there are only two ways to deal with the problem; one is to legislate against the behaviour that is detrimental in the longer term and the other is to convince the players to take a longer term view. What’s interesting about this debate is that there are people who do have a longer-term interest as well as some sway over the companies: the venture capital firms that invest in not just one start-up but many start-ups over a period of time. They have an incentive to make the environment the best for all companies to thrive. I hope Bijan Sabet manages to convince a few more of them! ”